BHP approves $1.5bn Apache gas project

BHP Billiton and partner Apache Energy have approved the development of the $1.5 billion dollar Macedon gas field off the coast of Exmouth in Western Australia.

BHP says it expects first production from its Macedon gas development in 2013 with recoverable reserves estimated at between 400 and 750 billion cubic feet of gas from the project.

BHP, which holds a 71.43 per cent share in the venture, will pay project costs of $1.05 billion while Apache, which has a 28.57 per cent stake, will pay the remaining $450 million.

The Macedon project involves four offshore production wells supplying a wet gas pipeline to an onshore gas treatment plant to be built at Ashburton North, 17 kilometres south-west of Onslow.

BHP says a sales gas pipeline will be connected to the Dampier to Bunbury Natural Gas Pipeline for sale to the domestic gas market in WA.

Engineering firm Clough completed front-end engineering and design work for Macedon in July and the WA Environmental Protection Authority has recommended conditional approval of the project.

Industry sources say the drilling of development wells at the field 40 kilometres north of Exmouth has already started.

BHP Billiton petroleum business president
Mike Yeager
indicated in March that the project was one of its local growth opportunities, alongside an expansion of the Longford gas plant in Victoria, the new Kipper and Turrum gas projects under construction in the Bass Strait, and liquefied natural gas ventures in the Browse Basin and at the Scarborough and Thebe fields off the WA coast.

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The Macedon project will also add to the burgeoning Australian business of Houston-based Apache, which started production at the Van Gogh and Pyrenees oilfields in the Exmouth Basin off the state’s north-west coast this year.

Gas from Pyrenees is set to be re-injected into the Macedon reservoir, about 10km away.

The project to develop Macedon, which was discovered in 1992 and lies just north of the Ningaloo Marine Park, involves four sub-sea wells, an 85km pipeline to shore and a gas treatment plant at Ashburton North.

A 67km gas pipeline to connect the plant to the major Dampier-to-Bunbury line may also carry third-party gas.

The venture will have a production capacity of 200 million cubic feet a day of gas, plus between 250 and 3200 litres a day of condensates, said BHP, which has suggested it may use the gas in its WA mining operations.

That represents almost a ­quarter of the state’s current gas consumption.

Despite repeated calls by WA gas users for an increase in domestic supplies, it has taken some years to make a decision on Macedon.

BHP has cited its “small size and remoteness". The deposit is too small to be independently developed for an LNG project, and only the rise in recent years in gas demand in the state has now made the project viable for domestic supply, BHP said in an environmental protection statement.

The deposit, below waters up to 180 metres deep, holds about 800 billion cu ft, of which about three-quarters should be recoverable.

A key obstacle to the field’s development was removed in November when legislation was passed to broaden the specifications of gas that can be carried in the state’s main pipeline.

Under the previous standards, the heating value of Macedon gas was too low for the transmission line.

The onshore gas plant will join Chevron’s planned annual 25 million tonne Wheatstone LNG project at Ashburton North, which may also host the potential 6 million-tonnes-a-year Scarborough LNG project between ExxonMobil and BHP, the EPA said.